Following its float on Thursday, Eve, an online mattress retailer, is now valued at £141.7m, putting it on a par with retailers such as Carpetright, despite having only a fraction of its revenue, as investors bet big on its future growth. While market conditions are positive within online bedroom furniture, given the high levels of competition, success for Eve is far from certain.
Online set to outperform stores in mattresses
Between 2017 and 2022, the online mattress market is forecast to grow by 63.9% to be worth £209.6m, as consumers become more comfortable buying mattresses through this channel. Consumer research conducted by GlobalData found that mattresses were the second most popular furniture item to predominantly research and buy online, trailing only home office. However, competition within mattresses will remain fierce. As well as the new bed-in-a-box entrants, such as Eve, Leesa, and Casper, established retailers, which are improving their ranges, service and store environment, will make it harder for new entrants to gain traction.
Gaining traction will be challenging for bed-in-a-box retailers
In a GlobalData survey in January 2017, 53.5% of mattress shoppers that bought from a multichannel retailer said they would not buy a mattress without testing it first. Further to this, when all mattress customers were asked which retailers they considered when buying, none of the bed-in-a-box retailers were in the top 30, indicating that they must continue to invest heavily to boost awareness. With little differentiation on price, delivery and trial periods between the players, these retailers must also communicate to customers how their mattress is superior. Given that three other pureplays have been awarded a Which? Best Buy Award, this could be challenging for Eve.
Reducing Eve’s returns rate of over 15%, caused by its 100 night home trial and free returns policy, must also be a priority. Many will not be resold, dampening margins and damaging brand perceptions as these customers are unlikely to recommend Eve to friends and family. Eve must, therefore, continue to invest in product development to improve quality, lowering returns and also keeping pace with its competitors.
Eve is well placed to emerge a winner within this sub-sector
While it will be challenging for bed-in-a-box retailers, Eve does have a number of advantages over its direct competitors. After going public, Eve now has the resources to invest heavily in marketing, driving brand recognition. It has agreed partnerships with multiple retailers to display its products instore, with Eve mattresses now in Debenhams and Next outlets, as well as Fenwick Newcastle flagship. It is also extending into other bedroom products, such as duvets and bedroom furniture, increasing its customer base.
Despite the buoyancy within online bedroom furniture and Eve being ahead of its peers, bed-in-a-box retailers overall still face a significant challenge in gaining traction within a highly competitive market. Awareness is low, the physical retailers are developing their offer and can provide better service throughout the buying process, and customers remain cautious about buying without testing. While Eve is better placed to succeed among the new entrants, as it has the resources to invest in marketing and product development and has a physical presence, Eve still faces a challenge in achieving the growth required to make the float a success.